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Compare cashflow loans for small businesses

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A short-term financing solution based on your future revenue.

Struggling to qualify for a small business loan, but don’t have enough collateral to back it? A cashflow loan could help you cover an emergency expense or secure working capital. But it can get expensive and isn’t meant as a long-term solution. It’s also not the only fast-financing option out there.

LoanBuilder, A PayPal Service Business Loans

Our top pick: LoanBuilder, A PayPal Service

Customizable business loans with no hidden fees.

  • Min. Amount: $5,000
  • Max. Amount: $500,000
  • One-time fixed fee charged over the life of the loan
  • Acclaimed customer service
  • Requirements: $100,000+ annual revenue, 1+ years in business, 600+ personal credit score

    What’s a cashflow loan?

    A cashflow loan is a type of short-term loan based on your business’s future revenue. Also known as an ACH loan, it’s similar to a merchant cash advance, which is secured by your business’s future credit card sales. In fact, some lenders offering cashflow loans refer to them as merchant cash advances, possibly because it’s a more familiar term for borrowers. How much your business is eligible to borrow usually depends on how much money it brings in each month.

    Business owners that don’t have strong credit might qualify for a cashflow loan. However, many lenders require your business to be around long enough to have sufficient revenue history — sometimes as long as two years. Others might have minimum revenue requirements as well.

    Compare top business loan providers

    Rates last updated January 17th, 2019
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    $5,000
    $500,000
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Kabbage Small Business Line of Credit
    A simple, convenient online application could securely get the funds you need to grow your business.
    $500
    $250,000
    1+ years in business, $50,000+ annual revenue or $4,200+ monthly revenue over last 3 months
    Credibly Business Loans
    Funding to cover business expenses with daily or weekly repayments.
    $5,000
    $250,000
    9+ months in business, $42,000+ annual business revenue, 550+ personal credit score
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    $500
    $5,000,000
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.

    Compare up to 4 providers

    How do cashflow loans work?

    Some cashflow loans, like those offered by OnDeck, work a lot like business term loans. Here, the lender charges interest and fees, which you pay back in fixed repayments over a set period of time. But more commonly, lenders charge a fixed fee that you repay with a percentage of your daily deposits.

    How much it costs

    Like with a merchant cash advance, lenders express this fee with a number called a factor rate. Lenders multiply your loan amount by the factor rate to get the total amount you have to pay back. Factor rates typically range from around 1.15 to 1.55, though they can get higher.

    Let’s take a look at an example: Say a small business takes out a $10,000 cashflow loan with a factor rate of 1.55.

    It’d have to pay back a total of $15,500 with a percentage of its daily deposits. It owes this amount no matter how quickly it pays off the loan. So, unlike with loans that charge interest, it won’t save by paying off the loan early.

    How repayment works

    Repayment on cashflow loans typically works a lot like merchant cash advances. Lenders withdraw a percentage of your daily deposits until the loan is paid off. This method of repayment can be more forgiving than other types of short-term financing because you’re often allowed to make $0 repayments if you don’t have any deposits that day.

    However, your business has a limited amount of time to repay the loan, often to the tune of one to two years. Some lenders have minimum monthly requirements for repayments and charge fees if your business doesn’t meet them.

    How to apply for a cashflow loan

    Many lenders offer online applications your business can fill out in a few minutes. The lender then reviews your application, lets you know if it thinks your business is eligible and asks for additional information or documents needed to make a decision. If it thinks your business is a good fit, it gives you an offer outlining the terms and conditions of the loan, which you sign and return.

    Typically, you can get your funds from a cashflow loan within a day or two if you apply online.

    Eligibility requirements

    While eligibility requirements vary, lenders typically aren’t as interested in your credit score as much as factors like your time in business, daily deposits and average monthly revenue. Businesses that have less than two years of experience might have trouble finding a lender, though it’s not impossible.

    Documents needed to apply

    Since cashflow loans are based on your future deposits, lenders want to look at your business bank account more than anything else. Generally, lenders ask to see at least six months of business bank statements, though some might ask for online access to view your account. You might also need to provide a voided check and state-issued ID for all account holders.

    Benefits and drawbacks of cashflow loans

    Still unsure whether a cashflow loan is right for your business? Weigh the pros and cons to decide if this short-term financing option could work for you.

    Benefits of cashflow loans

    • Bad credit OK. Since these loans are determined by your business’s revenue, cashflow lenders generally don’t care as much about your personal credit score.
    • Flexible repayments. Most lenders allow you to pay $0 if your business doesn’t bring in any sales one day — as long as you can pay off your loan by the time the term is up.
    • Quick turnaround. Typically, your business can get funds in one or two business days, sometimes even less.
    • No collateral necessary. Cashflow loans are based on your business’s future revenue, not the value of a specific asset.

    Drawbacks of cashflow loans

    • Can be expensive. Like merchant cash advances, cashflow loans are some of the more expensive types of business financing out there.
    • Not for startups. Many cashflow loan providers only work with businesses that have been around for at least two years.
    • Might require additional backing. While cashflow lending doesn’t require collateral, some lenders might ask for a personal guarantee or a lien on your business assets.
    • Daily repayments. Even though repayments are based on your revenue, it can be difficult to grow or take on new projects until the loan is paid off.

    Cashflow loans vs. asset-based lending

    Both cashflow loans and asset-based lending can be a solution for businesses struggling to qualify for traditional financing. The main difference is that a cashflow loan is more like an advance and doesn’t require collateral. Asset-based lending, on the other hand, is backed by money your business already has: inventory, accounts receivables, assets listed on your balance sheet and anything else that can be quickly traded in for cash.

    Sometimes lenders present cashflow loans as an alternative to asset-based lending, since your business doesn’t need to have collateral to qualify. But asset-based lending can be a better choice if your business is looking to grow or take on a new project, since it typically comes with monthly repayments.

    4 cashflow loan alternatives

    Cashflow loans aren’t the only way your small business can cover emergency costs or secure working capital. Here are a few alternatives to consider:

    1. Merchant cash advances

    As we’ve already mentioned, merchant cash advances are a lot like cashflow loans. The main difference is that they’re based on your business’s credit card sales rather than revenue as a whole. They’re also more popular than cashflow loans, which means retail, e-commerce and other businesses that heavily rely on credit card sales might be able to find more lenders with this option.

    2. Invoice factoring

    Invoice factoring is a financing solution for businesses whose clients are other businesses and government agencies. It’s an advance on your unpaid invoices, which you sell to a factoring company at a discount.

    Like cashflow lenders and merchant cash advance companies, factoring companies don’t care about your personal credit score as much as the value of your unpaid invoices. However, it can also be more expensive than other types of financing.

    3. Short-term loans

    Short-term business loans work a lot like traditional term loans, where your business borrows a fixed amount and pays it back over a period of time — plus interest and fees. The difference is that your business has less time to pay it back — usually 18 months or less — and APRs can often reach the triple digits. Some lenders that advertise alternative business loans charge a fixed fee instead of interest, which works a lot like a factor rate.

    Short-term loans can be a good alternative for younger businesses with an emergency expense. Short-term business lenders typically only require you to be in business a few months, work with poor-credit borrowers and don’t have the same revenue standards as cashflow lenders.

    4. Microloans

    If you can afford to spend a little more time on the application and only need a small amount of funding, microloans might be the way to go. You can find these small-dollar loans at nonprofits like Accion, which often come with more favorable rates and terms than the other alternatives. Many microlenders have minimal credit and revenue requirements and work with new businesses, though it could take more than a few days to get your funds.

    Bottom line

    Cashflow loans can be a quick fix for business owners who need funding but don’t have the collateral or credit score to qualify for a traditional term loan. However, the high cost and daily repayments make it less than ideal as a permanent financing solution.

    Read our guide to business loans to learn more about how they work and compare other options.

    Frequently asked questions

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    Anna Serio

    Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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